Canada Goose analysis on results & how this relates to RETGOOS reported strong earnings this morning and the stock has surged 9% as of writing time. Yesterday was a blood bath with the biggest retailers in the world like Wal-mart, Costco and Target all getting walloped. Inflation is hitting these retailers much harder - consumers are buying lower margin items (i.e. store brand vs. name brand). So going into today, I was a bit anxious on how GOOS earnings would go. They surpassed expectations. In the past, RET has followed quite closely to GOOS.
Basic GOOS vs. RET notes - GOOS reported an increase in revenue, but also a large increase in margin to 69% from 66% in 2021.
- One huge difference with GOOS is that they manufacture in Canada, so they have limited supply chain impact as compared to RET that purchases from overseas. So i'm not expecting a similar bump in margin for RET (depending on how much they are able to rise prices, if at all).
- GOOS is much more seasonal as they are heavy in jackets obviously.. so you can't look at their net income for this quarter. Almost all revenue is earned in Q3-Q4.. compared to RET which is a bit more even.
- GOOS lumps together their e-commerce with retail stores as "DTC", howevery they did report that the large increase in revenue is due mostly from existing retail stores as their e-commerce actually declined in Q4. This is positive for RET as it is an indication that retail is doing strong.
- Margin for GOOS is up, primarily due to pricing. This is because they are a luxury good that were able to increase their prices from inflation. I compare this with Walmart who were not able to increase prices. Luxury retailers are coming out better than basic retailers. So where does RET fit here? They are middle of the line IMO, a bit above Target, but not quite GOOS.
So the results this morning were quite positive for GOOS and I would say show that the retail sector is doing strong. However, I would say luxury retailers who have more pricing control are in better shape than the bottom end retailers. Reitmans strikes me as middle-of-the-road, so I believe that they will have decent revenues in the quarter, but I'm expecting margins to get squeezed with inflation & the supply chain issues as they don't have the ability to raise prices as much on consumers.